Successive months of interest rate cuts will no doubt encourage first-time buyers into the Canadian property market.
And with the promise of more rate reductions through 2025, young Canadians have an ideal time to purchase a home and begin to build their wealth.
Even as the cost of loans falls, the average property price has not moved in 12 months.
The median home price was $649,100 in August, up by just 0.1% on the corresponding period in 2023.
So, first-time buyers would benefit from starting their journey before values rise on the back of cheaper money.
More properties are coming to market now, and that’s another positive sign. It gives you greater choice and a stronger position to negotiate.
Property listings are up 1.1% from July to August, indicating a more optimistic outlook by sellers. And home sales rose 1.3% in the same period – the highest month-on-month increase since January.
With the fundamentals now swinging back to assist if not favour buyers, it’s a great time to be in the market. For first-time buyers, your first challenge will not be finding your dream home, but organising the finance.
Here are a few tips to overcome this hurdle:
- Downpayments: You’ll need a minimum downpayment of 5% of your loan. If you can manage 20% (usually with the help of family), you avoid paying mortgage insurance.
- Mortgage Insurance: This is a policy you pay for but from which you receive benefit. It protects the lender if you default. If there’s a way to avoid this, take it. The cost impacts the amount your lender will give you.
- Saving Schemes: It’s not easy saving for a downpayment. Make sure you’re using government programs established to help you. Check out the Tax-Free First Home Savings Account and the Home Buyers’ Plan (HBP).
- Mortgage Search: It’s old school to go around the banks asking for a mortgage. The smart play is to use a mortgage broker who has domain expertise and will offer deals from multiple banks. They get paid commission by the banks, not you. It’s an accepted practice supported by a code of conduct and oversight.
- Mortgage variety: There are countless variations of a mortgage. Your broker will help you decide which suits your financial situation. The differences include fixed and variable rate mortgages, hybrid mortgages, and deals that have penalty clauses for leaving early, high fees or low fees and lots of other subtle differences that make a difference to your financial position.
- Pre-Approval: You want to be preapproved for a loan before pouring hours into a property search. A pre-approval is not a mortgage, however. It is an indication your lender is prepared to lend you a certain sum based on your income and outgoings. You home-hunt with confidence on this basis. The actual mortgage is granted once the lender has assessed the value of the property you wish to buy.